AFTER the initial celebration, back-slapping and wave of congratulations that attended the completion of the first phase of the consolidation process in the banking sector, the Central Bank of Nigeria and its Governor, Professor Charles Soludo have since started outlining areas of intervention under the second phase of the process. But there are certain human-angle issues arising from the first phase, some of these touch on questions of justice and completeness; others are procedural and structural, which need to be resolved before the Consolidation train moves on expeditiously. It is not as if the CBN is not aware of these issues, the problem is that I do not see enough determination to handle them fairly and comprehensively. Constant reminders to cure the ill of present-mindedness, a national affliction, would seem appropriate in this instance as any other.

I happen to know a few persons whose money, including entire life-savings, is trapped in the 14 banks that failed to pass the Consolidation test. The CBN Governor had assured such persons that their deposits would be recovered, and paid by the Nigeria Deposit Insurance Corporation (NDIC) within 90 days, but by April, both the CBN and the NDIC were still offering promises; and in due course, these promises had taken the shape of excuses.

The principal excuse by the CBN Governor is that unless the failed banks - 11 out of the 14 - had chosen to challenge their liquidation in court - withdraw their case, the issue of deposits cannot be addressed. But how about the banks that did not go to court? And the three that have been liquidated? Professor Soludo has had cause to protest that the failed banks were mismanaged; their managers doctored the books, and introduced ghost depositors into the accounts and rather than eat the humble pie, they have the effrontery to challenge the CBN. What comes through each time the issue of the failed banks is considered is Soludo's anger, encapsulated once in the following biting words: "Quite frankly I don't know what you mean by settling out of court. There is just one way to go. Just withdraw the case from the court and we consider liquidating the bank. I don't know what they want to settle. I think my reading of the situation is that people go to court for a number of reasons. First they know that the court processes could be long, so you go there and stall it and use it as (a) potential way of running away from Nuhu Ribadu (EFCC) going to grab them the next day, because under the Failed Bank Act, these guys who ran the banks are liable possibly for the failure of those banks.

" But all those guys in their hearts of hearts, deep down they know that in a civilised society, they should be in jail. So when they talk of settling out of court I don't know what they are talking about. Certainly not with me. They have gone to court and we have also hired a team of lawyers who will give them a run for their money...If they like, let them keep it in court whenever it ends, but as I told them, if they are expecting the banks to resurrect, well, these banks are dead and dead full stop. If they are postponing the funerals, they can keep the funerals...."

Soludo's anger and declarations betray a certain bias which cover up other issues. It is true that the consolidation process was introduced in part to check mismanagement and outright criminal conduct in the banking sector and put an end to the era of mushroom banks. It is equally true that many bank directors abused their positions, as they stole depositors funds and cooked up the books. But this is an independent issue that can be isolated. The CBN needs not dismiss all the bank directors in one fell swoop: the appropriate task would have been to verify the books of the affected banks and identify the specific individuals who are guilty, and then ensure that they are subjected to the rule of law.

The bank directors are known; the roots of the distress in the individual banks can be investigated and the CBN can make appropriate recommendations to the police or the EFCC as the case may be. Depositors would be equally interested in knowing how their funds were mismanaged and to see that those who did so are brought to book. If any one is using the existing case in the courts, to prevent being unmasked and investigated, the CBN must find a way of making that impossible. The banks are in court as independent entities.

What is betrayed in the CBN's declaration is the assumption that the 14 failed banks were denied licenses, not necessarily because they did not meet the recapitalisation requirement, but on the ground that some of the banks were badly run. But how can this be an obstacle to the settlement of depositors? The issue before the High Court is not the management of the banks, but the banks challenging the refusal of the CBN to grant them licence collectively as Alliance Bank. On the moral question, it is instructive that at least one of the banks, Triumph Bank Plc is currently involved in a legal tussle with its former Managing Director and a judgement has been given by an Arbitration Panel.

It will be improper to comment on the details of this case, now on appeal, but it should be of interest to the Central Bank, not merely in terms of its details, but its import. Is it not possible to encourage a similar internal examination process in all the other banks, to provide an opportunity for vigorous audit beyond mere anger and as an entry point for making a strong statement about corporate governance? Again, how about the other banks that are not in court, which have been absorbed under a cherry-picking arrangement?

Besides, the key issue being presented for consideration by the banks that came together under the umbrella of the Alliance Bank is that of justice and fairness. The CBN Governor's emotive statements would seem to confirm the prejudice that the petitioners are alleging. The Alliance Bank Group had asked for an extension to deposit an additional N10.5 billion that was demanded by the Central Bank. This requested deposit was discriminatory as other re-capitalising banks or group of banks were not given the same condition. Also, the Alliance Bank Group (in formation) had alleged at the time that all the procedures involving its approval and merger were frustrated with unnecessary administrative red tape.

Whereas it was refused a one-week extension, the same extension was granted the Unity Bank Group until January 27, 2006. The CBN Governor's explanation is that those banks have no case because "all of them were bedevilled by poor operational performance, insider abuse, poor corporate governance and negative network". The puzzle is that whereas the intention of the CBN is to protect depositors, it is the same depositors that have been thrown into a quandary. Even the last minute effort to hand-over the distressed banks to some of the 25 emergent banks under a Purchase and Assumption model has not yielded the intended results.

Many of the affected depositors are pensioners. Under the existing law, every depositor cannot get more than N50,000. A bill that is before the National Assembly to raise minimum deposit insurance cover to N200,000 is not being considered. The average depositor is not interested in any negotiated or reduced payment. He or she does not want to hear any long stories about risks. He wants his money. And if someone has stolen that money, he wants that thief to be identified and punished. The endless wait for missing deposits is giving many of the victims hypertension and eroding confidence in the banking culture.

A court battle certainly does not cover the interest of the depositors. The Central Bank has ruled out any out-of-court solution, but clearly, the solution lies outside the courts. The statement that there is no option of resurrection in the banking sector is ominous. When Soludo speaks about funerals, he should worry about the fate of the innocents: hapless depositors and the innocent ones among the Directors of the failed banks who are routinely maligned each time the CBN Governor dismisses all the Directors as thieves. Is it possible to identify the real culprits, please? Professor Soludo should be reminded that there is something called group libel.

There are challenges of integration in the banking sector as well. Consolidation brought hardship to many families whose bread-winners lost their jobs. The cost of banking reform is to be measured in terms of the number of persons it threw into the unemployment market. It is already established that many of the victims of the process of staff rationalisation were in most instances, shown the door not on the grounds of incompetence but simply because the new emergent banks needed to shed load. A review of the criteria for disengagement would reveal patterns of discrimination and injustice in the work-place. Good looks, ethnicity, class of degree, religion, relationship with the boss...were some of the conditions that were thrown up. The CBN found itself practically unable to intervene in these matters. Close to a year after the mergers, acquisitions and re-capitalisation, it is also not every employee that managed to survive the hammer that can be described as happy. In some of the emergent banks, there are conflicting conditions of service, even within the same grade levels.

If you are unlucky to come from a bank that was acquired, or whose Managing Director lost out in the power calculations, you could find yourself earning less than the staff from the triumphant partner-bank; and yet the illusion of a new bank cannot be denied. The excuse that is given by the various banks under these circumstances, is that it would take a while before conditions of service could be harmonised. Shouldn't this have been worked out during pre-merger negotiations? I am told that this is not possible because the original agreements were only in principle and that in every merger situation, there are bound to be immediate and mid-term challenges. Yes, this is theoretically acceptable. Except that the present regime of unequal pay for equal work in the affected banks is not good for staff morale; even the customer s can sense the internal class discrimination in the newly married banks, and it is taking too long to address the immediate challenge of staff expectations.

Consolidation was meant to lead to enhanced services and a deepening of financial intermediation on the part of the banks. We are not quite there yet as expected. I recall that many bankers had hoped that with consolidation, the pressure on them to perform and deliver would reduce. But what consolidation has brought is greater competitiveness and a demonic obsession with capital. The banks are still hunting desperately for deposits. They are still hounding the staff in their marketing departments, and setting impossible targets. Access to credit by small-scale investors remains difficult as the banks have become financial supermarkets with interest in big-scale return on investments. The emphasis is on big capital, big size, big results! Ironically, this has its advantages. The depositors who did not lose money have greater confidence in the banks. The banks themselves are emerging as global players, they are winning international recognition and acclaim and there is greater competitiveness. Although, many workers may have been retrenched, the same banking industry is emerging as a growing, enlarged market for labour.

I admit then, ahead of the frrst year anniversary, that the first phase of Banking Consolidation is like every human condition: with winners and losers. But the principal winners are: Capital and Institutions. The biggest loser is the human element. We can debate this.

Robot  # 1 | 18.08.2006 22:41

I happen to know a few persons whose money, including entire life-savings, is trapped in the 14 b...Read the full article.